For Immediate Release
January 6, 2016

Contact: Craig Thiel
517.485.9444
or Eric Lupher
734.542.8001

New CRC Report Documents Detroit Public Schools’ Debts

Despite repeated calls from Detroit community leaders and Governor Snyder, state lawmakers closed out the legislative year without taking action to address either the financial or academic crisis facing Detroit Public Schools (DPS). A new report by the Citizens Research Council of Michigan, Detroit Public Schools’ Legacy Costs and Indebtedness, analyzes the various debts facing the struggling school district and some of the challenges lawmakers may face in developing a plan to assist the district with debt relief.

The Detroit Public Schools has $3.5 billion in outstanding debts. The district’s debts have been growing. Nearly half of the current amount, $1.7 billion, is capital liabilities payable with a dedicated millage.

The balance of DPS’s liabilities are related to legacy costs and repaying short-term borrowings converted to long-term debt by state-appointed emergency managers. This includes $1.3 billion that represents DPS’s estimated share of the unfunded actuarial accrued liabilities for retiree pension and health care costs; $97.5 million of legacy costs unique to DPS; and $463 million of long-term debt being repaid from operating funds.

“No other district is saddled with the operating debts DPS faces. Eliminating these debts would make the district’s financial situation much more similar to other school districts in the state,” said Craig Thiel, Senior Research Associate. “Depending on how the debt retirement is structured will determine whether putting DPS on par with other school districts comes at the expense of funding available to all other districts statewide.”

Paying the debt service on the district’s operating debt competes for resources the district receives to fund education services for today’s students. For the current year, 40 percent of the district’s per-pupil funding will have to go towards repaying past cash flow borrowings; borrowings that supported education provided to previous DPS students.

“Given the sheer size of the debt, there is no way of escaping the fact that state lawmakers are going to have to address the financial situation. However, other reforms, including governance and management changes, must be made to ensure that the academic crisis is not ignored and that fiscal problems don’t return in the future,” Thiel said.

CRC’s report is available at no cost on the Citizens Research Council’s website, www.crcmich.org.

Founded in 1916, the Citizens Research Council of Michigan works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance. By delivery of this information to policymakers and citizens, CRC aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.

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